Treasury: Seniors Must Take Retirement Account Withdrawals This Year
Retirees older than 70 ½ will not be required to take withdrawals from their retirement accounts in 2009. But the Treasury Department and Internal Revenue Service decided seniors will not get the same tax relief this year.
Those over age 70 ½ must take a required minimum distribution from their IRAs, 401(k)s, and 403(b)s by December 31, or pay a tax penalty of 50 percent of that amount plus income tax. Seniors who turn 70 ½ this year have until April 1 to make the required withdrawal.
The amount retirees must withdraw is based on the December 31, 2007 account balance divided by life expectancy as determined by the IRS. Most American’s retirement accounts have significantly declined in value since then. So, retirees must take withdrawals from severely depleted portfolios.
Congress passed a bill last week that temporarily suspends the required distribution rule for 2009, but the legislation did not address mandatory withdrawals for this year.
Kevin Fromer, the Treasury's assistant secretary for legislative affairs, wrote in a letter to Congress:
“Any steps Treasury could take would be substantially more limited than the relief enacted by Congress and could not be made available uniformly to all individuals subject to required minimum distributions. In addition, implementation of such changes would be complicated and confusing for individuals and plan sponsors. Thus, all individuals who are subject to required minimum distributions for 2008 should take their distribution under the existing rules and, as a result of relief provided by Congress, they will be entitled to a complete wavier of the requirement to take any distributions for 2009.”
Tags: retirement
Tools: 
Share
|
| Comments (5) | Print
Reader Comments
MRD
I am 83 and find I must stretch a badly depleted IRA
much more than planned. The fair solution would be to reduce the penalty for failure to withdraw in 08 to a nominal amount--5% and to measure the MRD from the value at close of 08 rather than 07..
mandatory IRA withdrawal
AS my IRA shrank I saw how devastated the account would be if I had to make the usual annual withdrawal. My congressman was most favorable to a suspension but it will be a year late, and my already pitiful IRA is much worse off. why wasn't 2008 included? congress will have many questions to answer!
Congress and Treasury Should Take Blame
The broad stock index S & P 500 has been cut in half since the end of 2007. To force seniors to take MRD in 2008 based on valuations at the end of 2007 is like a double penalty. Both congress and the treasury should have acted to prevent this double hit on senior citizens that have worked hard to save some wealth for retirement years. The melt down in equities is partly due to government policy (cheap money) and lack of regulations and for the government to not look out for senior citizens welfare is really bad.
advertisement
